Uncertain Outlook for Japanese Auto Production After Quake

March 14th, 2011
Nissan cars awaiting shipment destroyed by fire and flood

Nissan cars awaiting shipment destroyed by fire and flood

The humanitarian aspects of the quake and tsunami in Japan are bad enough: 10,000 feared dead, 2.7 million households without either power or water, 24,000 people stranded in northeastern Japan. The Japanese prime minister calls it the worst crisis since the end of World War II.

The Japanese economy is struggling, and so is its auto industry. There doesn’t appear to be much direct damage to the plants, but infrastructure damage—primarily to electricity, water and rail, plus overseas shipping—will cause severe problems for months. Parts shortages and supply chain interruptions will make it impossible to produce finished cars.

The seven top auto producers have suspended production for at minimum several days. Toyota will be out until at least Wednesday, resulting in a loss of 40,000 vehicles. While many Japanese cars are built in the U.S., production here will suffer if plants don’t get the parts they need from Japan.

Cars built in Japan, like the Prius and Lexus, will be in short supply. One Prius dealer in Florida reports that he has sold out, because of rising demand owing to high gas prices, and has put used cars on his showroom floor. And the earthquake was just four days ago!

Burning factoryThe biggest problem for automakers may be the lack of power, as Tokyo Electric has instituted a series of rolling blackouts to save power, and these will continue for an indefinite time. Tomorrow’s Green Update will look at some of the implications of Japan’s nuclear disaster on future energy sources and resources and how these affect the auto industry.

Automotive News talks about the effect of the power shutdowns:

The planned blackouts have crimped business operations as well as interrupted train services, making it difficult for many employees to report to work. Reported gasoline shortages, triggered by damaged refineries, have further contributed to a logistical and transportation snarl.

The Japanese carmakers have been hit hard in Monday’s stock market, as the Nikkei dropped 644 points, its lowest level in four months. Toyota was down 7.9 percent, and Nissan lost 9.5 percent.

The big questions now seem to revolve on what happens at the nuclear power facilities, and whether those problems can be resolved.

Have you seen pictures of the disaster? These are astonishing.

—jgoods

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  1. Randy
    | #1

    The real irony is that all those tens of thousands or cars and trucks you saw floating away will have to be replaced, so in the long term it will be a boost to the Japanese auto industry. The supply lines might be disturbed to countries outside Japan, but in Toyota’s case at least, they still haven’t recovered sales from the quality debacle.

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